Zinc Ingot Supply Likely to See a Surplus of 8,700 mt in Sep, Inventory Changes Worth Attention

SHANGHAI, Sep 13 (SMM) - Zinc stocks across LME-listed warehouses declined 9,325 mt to 226,900 mt last week. The contango of LME cash to 3-month contract rose to $14.5/mt. The market expects that the FOMC will not propose a gradual reduction in debt purchases in September due to sluggish US data and the spread of Delta virus. At the same time, the European Central Bank's speech is relatively optimistic, and the market holds a moderate outlook. LME zinc is expected to move between $3,030-3,110/mt.

Zinc ingots output fell 6,300 mt on the month to 508,900 mt in August, far less than the market estimate. Power curtailment in Guangxi was relieved earlier than expected. Operating rates at local smelters reached 80%-90% in September. Zinc ingots output is expected to stand at 520,700 mt in September amid the resumption of production. SMM maintained the viewpoint that the consumption is muted during high season. Output cut at steel mills has exerted an impact on galvanised zinc production lines.

Boxing, Shandong is likely to be subject to environmental protection measures due to the Winter Olympics Games. Galvanised structural parts plants still suffered losses while galvanised pipe plants faced greater pressure from finished products. The launch of special bonds accelerated, which needs time to reach the end participants. Export orders of die-casting zinc weakened amid shipping schedule issues and the shortage of containers.

SMM believes that there will be a surplus of about 8,700 mt zinc ingots in September amid the deliveries of government stockpiles. The most-traded SHFE contracts prices are expected to stand at 22,400-23,200 yuan/mt this week, spot premiums of Shanghai zinc will stand at 150-190 yuan/mt over the October contract.